SECURE Act 2.0 Retirement Planning Opportunities
On December 23, 2022, the US House of Representatives passed the Consolidated Appropriations Act of 2023. The spending bill authorized roughly $1.7 trillion in new Federal spending and included a retirement bill known as SECURE Act 2.0. Below, we summarize several provisions of the SECURE Act 2.0 that are particularly relevant.
1. Required Minimum Distribution (“RMD”) Starting Age Pushed Back Yet Again
The age at which retirees must begin withdrawing RMDs is raised from 72 years old to 73 years old beginning in 2023, and to 75 years old beginning in 2033. For those who turned 72 or older last year, there are no changes.
2. Roth-Related Changes
Historically and through 2023, while Roth IRAs are not subject to RMDs, employer-sponsored designated Roth accounts (such as Roth 401ks) are subject to them beginning at age 72. However, beginning in 2024, RMDs for Roth accounts in qualified employer plans will be eliminated.
3. 529-to-Roth IRA Transfer Allowed After 15 Years
The bill authorizes money that was earmarked for education to be repurposed as retirement savings in the event those funds are not needed for education. Beginning in 2024, individuals can move a lifetime maximum of $35,000 of 529 plan money directly to a Roth IRA. The Roth IRA receiving the funds must be in the name of the 529 plan beneficiary, the 529 plan must have been maintained for 15 years or longer, any contributions to the 529 plan within the last five years are ineligible to be moved, and the annual limit for how much can be moved is subject to IRA rules (i.e., the beneficiary will have to have earned income) and contribution limits for the year.
4. New Catch-Up Contribution Limits for 60-, 61-, 62- and 63-Year-Old Participants
Employer-sponsored 401k and similar plan participants who are 60, 61, 62, and 63 will have their plan catch-up contribution limits increased to the greater of $10,000 or 150% of the regular catch-up contribution amount for such plans, effective 2024. Note, however, that those who earned more than $145,000 in the prior year will have to put catch-up contributions into the Roth portion of their employee-sponsored plan.
Similarly, SIMPLE plan participants who are age 60, 61, 62, or 63 will have their plan catch-up contribution limits increased to the greater of $5,000 or 150% of the regular SIMPLE catch-up contribution amount for 2025 (indexed for inflation).
5. Saving for Emergencies in Employer-Sponsored Plans
Effective in 2024, the bill creates a new type of rainy-day Roth Emergency Savings Account (“ESA”). The account will be linked to existing employer retirement plans with individual balances. Only employees who are otherwise eligible to participate in the sponsoring employer’s retirement plan and who are not highly compensated may participate. The maximum employee contribution limit to an ESA is $2,500. However, employers may impose a lower limit at their discretion.
SECURE Act 2.0 is embedded in a 4,000-page bill and is a combination of three separate bills seeking to broaden retirement savings among Americans. Due to the robust nature of the legislation, the above list is not exhaustive and continues to be interpreted. We will contact you individually if there are additional aspects of the law that may impact your specific circumstances and goals. As always, we are also available to discuss the provisions at greater length. Please don’t hesitate to reach out to us.
We look forward to our discussions throughout the New Year.
Warm Regards,
Tonia, Barbara, Adriana, and Vrunda
The Kaminsky-Silverman Group
This information is for illustration and discussion purposes only. It is not intended to be, nor should it be construed or used as, investment, tax, accounting, legal or financial advice. Shufro, Rose & Co., LLC is an investment adviser registered with the Securities and Exchange Commission. ADV Part 2A and Form CRS are available upon request or at https://adviserinfo.sec.gov/. Please contact Shufro, Rose & Co., LLC at (212) 754-5100 with any questions.
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